Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.92% or Libor + 1%. A swap bank quotes 7.55 - 7.64 against flat Libor. How much can Amazon save (in basis points) by entering a swap agreement? A put option with a strike of $1.22/£ has a premium of $0.690. The current spot exchange rate is $1.476/£. What is the option's time value?

Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.92% or Libor + 1%. A swap bank quotes 7.55 - 7.64 against flat Libor. How much can Amazon save (in basis points) by entering a swap agreement? A put option with a strike of $1.22/£ has a premium of $0.690. The current spot exchange rate is $1.476/£. What is the option's time value?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.93% or Libor + 1%. A swap bank quotes 7.49 - 7.65 against flat Libor. How much can Amazon save (in basis points) by entering a swap agreement? 56
The table below presents the costs of borrowing for Microsoft and Tesla, and the aSwap Bank quote against LIBOR. Microsoft would like to get a $3,000,000.00 floating rate loan. Tesla would like to get a $3,000,000.00 fixed rate loan. How much can the swap bank profit from entering into a swap agreement with Microsoft and another withTesla? Fixed-Rate Borrowing Cost Floating-Rate Borrowing Cost Microsoft Tesla Swap Bank Quote 4.00 8.50 Libor Libor+4.40 Bid Ask 4.05% 4.08% O $2,400 O None of the alternatives O $600 $1,500 $900
In a recent e-news, you observe that the 6-month forward rate is $1.5031/Euro. Further, if you invest the dollar, it fetches you interest at the rate of 2% p.a. In comparison, the interest rate in Eurozone is 1% p.a. You also see that CAD 1.5513 are needed to purchase a Euro and CAD 1.332 are needed to buy a US$. Is it possible for you to make an arbitrage profit? If so, which arbitrage strategies will you employ and what will be the profit? Assume that interest rate parity holds and you have one million dollars available to conduct arbitrage.
Solve all questions , otherwise I will give you downvote CIP stands for covered interest parity. Solve for blank. According to CIP, 1. if i_$=5%, i_yen=10%, current exchange rate is 100 yen/$, then forward exchange rate would be ____ yen/$. 2. if i_$=5%, i_yen=10%, forward exchange rate is 100 yen/$, then current exchange rate is ____ yen/$. 3. if i_$=5%, current exchange rate is 110 yen/$, forward exchange rate is 100 yen/$, then i_yen= ____ %. (if your answer is 8%, you can put 8 in the blank, not 0.08). 4. US interest rate is i_$=20%. An investor is indifferent between putting $ savings in US saving account, or converting their $ savings into euro, buy a DaVinci painting, hold on to the Painting for one year, sell it at the end of the year for euro, and convert euro back to $. If the painting is expected to appreciate 15% over the next year, then euro is expected to appreciate ____% relative to $ over the same year.
Tyson Inc. is entering into a 3-year pay-euros and receive-dollars cross currency swap. The 3-year swap interest rates are quoted in the table below. At what rate will Tyson receive dollars and at what rate will Tyson pay euros? Question 8 options: Receive at 2.28% and pay at 1.89% Receive at 2.23% and pay at 1.95% Receive at 2.28% and pay at 1.95% Receive at 2.23% and pay at 1.89%
You Answered Today you observe the folowing quotes: Spot EURUSD $1.37 60 Day Forward EURUSD = $1.15 In 60 day you expec to receive 281,718 Euros. In 60 days you expect the EURUSD exchange rate to be $1.17. In 60 days the EURUSD actually is $1.21. You decided to hedge your receivables with a forward. How many USD will you receive? 232,824.79
i sold a call option with an exercise price of $1.20/euro. the premium was $0.02/euro. what is my profit or loss if the exchange rate is $1.18/euro?
You can borrow CAD (Canadian dollar) at 8 percent, which is 2 percent above the swap rate, or at CAD Libor + 1 percent. If you want to borrow at a fixed-rate, what is the best way: direct, or synthetic (that is, using a floating-rate loan and a swap)? Direct borrowing would be to borrow at a fixed rate of 8 percent. Synthetic fixed-rate cad borrowing would be to borrow CAD at a floating rate of Libor + 1 percent and arrange a swap where you pay fixed 6 percent CAD in exchange for receiving CAD Libor.
Two companies, Company A and Company B, are looking to enter into an interest rate swap agreement. Company A Company B Fixed rate 5% 6% Floating Rate 3-month LIBOR plus 1% 3-month LIBOR plus 1.5% Suppose that company A requires a floating-rate borrowing and company B requires a fixed- rating borrowing. A financial institution is planning to arrange a swap and requires 20bps spread. If benefits are equally shared both companies, what rate of interest will A and B pay?
Use the following information about an interest rate SWAP contract to answer the following question. Assume ½ for the date count fraction. (Do not round intermediate calculations.) If Bank of America wants to make a book P/L of $30,000, what adjustment should it make to its LIBOR floating payments? Counter Parties Notional Principal Fixed Rate payer Fixed Rate Floating Rate Payer Floating Rate Floating Rate Reset Effective date Maturity Date Barclays & Bank of America $8,000,000 Barclays 6% (s.a.) Bank of America LIBOR+???bp (s.a.) 6 months December 21, 2020 December 21, 2023 Term (Years) Pay rate zero Discount Factor Receive rate zero 0.5 5.25% 0.9747 5.33% Discount Factor 0.9744 1 5.78% 0.9454 5.88% 0.9445 1.5 5.97% 0.9167 6.17% 0.9141 2 6.22% 0.8863 6.33% 0.8845 2.5 6.31% 0.8582 6.43% 0.8557 3 6.39% 0.8304 6.51% 0.8276 Provide you answer in basis points, rounded to two decimal points. Recall that 1% = 100 basis points. The following numbers are meant to provide guidance for…
Please explain all calculations and actions please: You are about to sign an interest swap to pay fixed and receive floating. The quote is 4.5-4.7% against LIBOR flat. The principal is 100,000. What is the value of the swap? (please use a fixed rate to discount the cash flows.) Round to the nearest US cent (2 decimal places).
Current exchange rate (Feb 15, 2018) is .0090 $/Yen. You speculate the exchange rate will be .0087 $/Yen on Mar 15, 2018. You plan to make money in the currency exchange market through the 'Short-selling' method. In this case, the first step is you borrow ________. Group of answer choices Yen US$

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